1. IGCSE ECONOMICS COSTS To explain the difference between the long run and the short run. To identify and calculate the various different costs To explain how, why, and when Diminishing returns will occur.

2. IGCSE ECONOMICS Total Costs Fixed Costs Variable costs Examples?

3. IGCSE ECONOMICS Short Run At least one factor of production is fixed Long Run All factors of production are variable

4. IGCSE ECONOMICS Understanding Total and Average Costs Output = 2 Hershey chocolate bars Total Variable cost = $10 Total Fixed cost = $50 Total Cost = Average Cost = Average Variable Cost= Average Fixed Cost= $60 $30 $5 $25

5. IGCSE ECONOMICS Understanding Total and Average Costs Output = 3 Hershey chocolate bars Total Variable cost = $15 Total Fixed cost = $50 Total Cost = Average Cost = Average Variable Cost= Average Fixed Cost= $65 $21.70 $5 $16.70

6. IGCSE ECONOMICS Understanding marginal costs Total cost of producing 2 Hershey bars = $20 Average cost = $10 The business decides to produce one extra Hershey bar. The marginal cost = $8 AC = $9.33

7. IGCSE ECONOMICS Understanding diminishing returns THE FACTORY Produces 10 units Produces 25 units Produces 50 units Worker x 1 = $10 Worker x 2 = $20 Worker x 3 = $30 Calculate the Average Variable Cost of production at each level of output Worker x 4 = $40 Produces 52 units

8. IGCSE ECONOMICS Cost Curves Why do they typically look like this?